Details Leak on Dov Charney Firing; Litigation Looming - In House
In House - The FindLaw Corporate Counsel Blog

Details Leak on Dov Charney Firing; Litigation Looming

Last week, American Apparel axed its founder, CEO, and 27 percent shareholder, Dov Charney, after an "investigation into alleged misconduct." We couldn't help but wonder: with all of his public idiocy (sexual harassment, labor law violations, slurs, and most damning of all: unprofitability), what caused the company to finally pull the trigger, five years too late?

From the reports? Not a whole lot more than we already knew about, including sexual misconduct, as well as a few allegations of personal use of company resources. The real surprise was the way the termination played out: a ten-hour meeting with Charney and an ultimatum: resign or be fired for cause.

Termination Letter

Charney's termination letter leaked online to Buzzfeed, and here are some of the unsurprising allegations:

  • Knew about, but did not stop, an employee from creating "false, defamatory and impersonating blog posts about former American Apparel employees."
  • Handed out severance packages and raises to employees to ensure that his "misconduct vis-a-vis these employees would not subject [him] to personal liability,"
  • There are an assortment of sexual harassment complaints and lawsuits, including the leaking of nude photos of an employee that had sued the company, reports The Wall Street Journal.
  • Charney also refused to attend harassment training and interrupted employees' California state-mandated sexual harassment training
  • Purchased travel for family members with company funds
  • AA's employment practices liability insurance retention has grown to $1 million from $350,000, and the premiums for this insurance are well outside of industry standards, all presumably due to Charney's misconduct.
  • Alleged subordination of perjury in a pending litigation matter that will undermine the company's position in the case.

A quick caveat about BuzzFeed's copy of the letter: it appears to be a preliminary draft. Not only are there grammatical errors ("we were recently appraised that you engaged in misconduct,") but the screenshots have the telltale red squigglies of Microsoft Word and the letter is unsigned.

Also, the letter purports to only give Charney one day to cure all deficiencies, a time period far shorter than the thirty days mentioned in Charney's response letter. Both letters seem to indicate that some time period and opportunity for cure was required by Charney's employment contract.

Charney's Counsel Responds

Charney's attorney, Patricia Glaser of Glaser Weil, in a letter to the company, addressed the company's treatment of its founder.

Last Wednesday, Charney was presented with an ultimatum: take a four-year consultancy gig for $1 million annually after resigning, or be fired for cause. Glaser's letter notes that he was not given the opportunity to negotiate, discuss the reasons for termination, or to consult with counsel.

He was also not given twenty-one days to consider the severance agreement, as required by the Age Discrimination in Employment Act (ADEA). Glaser alleged that the company forced her client to sign a false separation agreement that stated that he was, in fact, given the twenty-one days, despite being presented with the document earlier that day.

Her letter also points out what we've been saying all along: most of these allegations are incidents that "occurred long ago (if at all) and about which the Board and the Company have had knowledge for years."

Litigation Certain?

Pretty much. Glaser's letter demanded a meeting with the board and her client by today. Reuters cited inside sources that said that the Board felt that a meeting would be unproductive.

Plus, the reasons for termination here seem like mere pretext: after five years in the red, and years of publicized misconduct, the board finally decides to act based on allegedly "newly discovered" misconduct that doesn't sound too far off from what the public already knew about?

Like we said last week: too little, too late.

Related Resources: